Chelsea recognised the "immense contribution" Mourinho had made to Chelsea and English football in an "open letter" to fans.

But it added that he had left his job "by mutual consent" as the "breakdown" was affecting the team's results.

Chelsea have placed director of football Avram Grant, the former Israel coach, and assistant manager and ex-Chelsea defender Steve Clarke in charge of their first team.

The letter said: "Early this morning we announced that Chelsea and Jose Mourinho had agreed to part company by mutual consent.

"The key phrase here is that there was mutual agreement. Jose did not resign and he was not sacked.

"What is clear, though, is we had all reached a point where the relationship between the club and Jose had broken down.

"This was despite genuine attempts over several months by all parties to resolve certain differences.

"The reason the decision has been taken is that we believed the breakdown started to impact on the performance of the team and recent results supported this view."

Mourinho arrived in 2004 after Champions League success with Porto but is now in talks for a financial settlement with the club he brought consecutive Premier League titles in his first two years in charge.

His salary in the remaining three years of his contract was £5.2m per annum.

However, it is understood the agreement will include confidentiality clauses that prevent him from divulging any club secrets.

This morning, Mourinho made a brief visit to Chelsea's training facility in Cobham, Surrey, where he met the players he had guided to five trophies, including two Carling Cups and this year's FA Cup, in his three years in charge.

While Chelsea said the squad was in "buoyant mood", Mourinho's emotional farewell was reported to have left striker Didier Drogba in tears. Drogba, the Ivory Coast international, is just one of the players for whom Mourinho was the pivotal figure at Stamford Bridge.

Captain John Terry and his England team-mate Frank Lampard were also close allies of Mourinho in his stormy final year at Chelsea, during which the club surrendered its championship to Manchester United and again failed to lift the Champions League crown coveted by Russian owner Roman Abramovich.

The departure will inevitably be interpreted as confirming that Mourinho's difficult relationship with billionaire Abramovich had finally come to a head.

The 44-year-old could however, reportedly seek up to £25 million from the club as he left with three years to go on his contract.

Mourinho was unhappy with the £30 million arrival of Andrei Shevchenko, a striker much admired by Abramovich.

The self-styled "Special One" rarely praised Shevchenko and pointedly ignored the Ukrainian when he scored in Chelsea's embarrassing 1-1 Champions League draw with Norwegian side Rosenborg on Tuesday night.

Following Chelsea's lame display in a competition Abramovich has his heart set on winning, Mourinho was yesterday summoned to a crisis meeting before the news was announced.